A report by Amnesty International out today found that an alumina refinery in eastern India operated by a subsidiary of mining company Vedanta is causing air and water pollution that threatens the health of local people and their access to water.

Amnesty International UK director Kate Allen said: "People have a right to water and to a healthy environment but Vedanta has failed to respect these rights in Orissa. Villagers were given scant and misleading information about the potential impact of the alumina refinery and mining project.

"They are living in the shadow of a massive refinery, breathing polluted air and afraid to drink from and bathe in a river that is one of the main sources of water in the region."

One local woman told Amnesty International that she used to bathe in the river but is now scared of taking her children there. "Both my sons have had rashes and blisters," she said. Amnesty recorded many similar accounts from people living around the Lanjigarh refinery.

Vedanta wants to expand the refinery sixfold but Allen said that the FTSE 100 company must ensure that its existing operations respect human rights before considering any expansion.

Amnesty is also calling on the Indian authorities to set up a process to seek the free, prior and informed consent of the Dongria Kondh before allowing mining to proceed.

The report also discovered that Vedanta has failed to act upon the findings of the British government regarding its proposed bauxite mine. In October, a government agency charged with promoting guidelines on ethical corporate behaviour for multinational companies adopted by the Organisation for Economic Co-operation and Development (OECD) found that Vedanta had "failed to engage the Dongria Kondh in adequate and timely consultations about construction of the mine". The government said it "could not find any record of the views of the ­Dongria Kondh about the construction of the bauxite mine in the Niyamgiri Hills ever having been collected and/or taken into consideration by the company".

The Church of England last week said it had sold its £3.8m stake in Vedanta after mounting pressure to disinvest.

"We are not satisfied that Vedanta has shown, or is likely in future to show, the level of respect for human rights and local communities that we expect," said the church in a statement, adding that maintaining investments in Vedanta "would be inconsistent with the church investing bodies' joint ethical investment policy."